1. Field of the Invention
This invention relates to a system and method for enabling wagering in casino games using the future value of money.
2. Description of the Related Art
Many gamblers like the idea or experience of gambling with large amounts of money. They want to feel and act like a "high roller." Most gamblers, however, do not have the financial resources to bet at this level. Even those gamblers with sufficient funds available are often reluctant to place that much money at risk. The typical gambler is thus restricted in that he may only wager the amount of money that he is comfortable putting at risk, diminishing his playing experience.
Casinos have tried to solve this problem, and thereby enhance the experience of winning, by magnifying the perceived payouts of slot machine jackpots. This magnification is typically accomplished by electronically displaying the enhanced jackpot value at or near the slot machine, with winnings paid in equal installments over a large number of years, often twenty or more. A $1,000,000 jackpot, for example, might be paid as 25 annual installments of $40,000. By extending payouts over a number of years, rather than paying as a lump sum, casinos are able to support substantially higher "total" payouts while holding operating margins to acceptable levels. For example, the net present value of a 25 year payout stream is usually less than 50% of its cumulative value of payments. Thus, the $1,000,000 slot machine jackpot paid out over 25 years may be purchased by the casino for $300,000 to $400,000, depending on the prevailing interest rates at the time of purchase.
Due to the natural tendency of people to underestimate the net present discounted value of money, the gambler often perceives the $1,000,000 annuity payout to be substantially superior to a $300,000 to $400,000 lump sum payout. This extended payment technique is also used by state lotteries for their top lotto jackpots. The lottery sponsor can thus advertise a larger annuity prize than what is being paid out in a net present value sense, enhancing the perceived value of the payout.
Paying out prizes as an annuity stream, however, is only practical for large and infrequent payouts since there is considerable operational overhead associated with purchasing the annuity and setting up the payment mechanism. Accomplishing such objectives requires not only human resources, but also computer accounting systems to maintain the annuity payment data. Such systems are totally impractical for prizes of less than several hundred thousand dollars, eliminating applicability to casino games such as blackjack or craps. Additionally, annuity payment systems magnify only the payout. The wager itself remains a lump sum. Consequently, gamblers lack the experience of being a "high roller" when buying a $1 lottery ticket or pulling the handle on a dollar slot machine.
As is apparent from the above-described deficiencies of conventional gambling payment systems, a need exists for a system which magnifies the perceived value of smaller payouts. A further need exists for a system which magnifies the perceived value of smaller wagers.